Zorana Mihajlović, Serbian Deputy Prime Minister: Serbia Will Also Be A Leader In Cadastre Reform

Serbia this year entered the world’s top 10 countries for the issuance of electronic building permits, leaving some of the world’s most developed countries in our wake. And we have to preserve this achievement

We believe it’s possible for Serbia to advance in a short period of time by at least twenty places, compared to its current position of 57th in the area of cadastre, and that the complete implementation of reforms can make us one of the leaders in this field, as we already are in the area of issuing building permits.

What more can Serbia do specifically in your area of competence to improve its ranking on the Doing Business Index?

– Following the introduction of e-permits, the next major reform we are preparing is cadastral reform, which is also crucial to Serbia’s further progress on the Doing Business list. Registering a property in the cadastre currently requires visiting five or six places, the procedure is too complicated, regulations enable major obstructions, while our goal is for the entire procedure of registering a property to be conducted in one place, at the offices of notaries, and for everything to be completed in just a few days. That is a major task ahead of us.

There’s no standing still, because countries that don’t work constantly to improve their regulations quickly lose their position. Serbia has exclusively advanced over the last three years and our goal is to enter the world’s top 20 countries in terms of conditions for doing business. To achieve this we must continue at the same pace, further improve the e-permit system, reform the cadastre and implement all other reforms – implementing the laws on bankruptcy and on companies, and abolishing para-fiscal charges.

At your ministry do you conduct analyses about the impact of constructing major transport projects on real estate sector growth?

– The value of works carried out by companies from Serbia throughout the entire territory of the country in the third quarter of 2017 was up 6.3%, expressed in fixed prices, compared to the third quarter of 2016. Viewed in terms of regions, the value of works carried out at fixed prices increased the most in Belgrade, by 23.2%, followed by southern and eastern areas of Serbia, by 2.9%, and then in the Vojvodina region, by 1.8%.

When we view the real estate sector alone, the value of construction works in the third quarter of 2017 is 29.1% higher than in the third quarter of 2016, expressed in fixed prices.

Completion of the construction of Corridor 10, the intensive construction of Corridor 11 and the modernisation of the railways have a very positive impact on implementation in all sectors of the construction industry and, consequently, also on the real estate sector.

Registering a property in the cadastre currently requires visiting five or six places, the procedure is too complicated, regulations enable major obstructions, while our goal is for the entire procedure of registering a property to be conducted in one place, at the offices of notaries, and for everything to be completed in just a few days

How much does the opening of key corridors represent an incentive for the construction of commercial real estate or greater FDI in parts of Serbia that were previously difficult to access?

– Every newly constructed road, especially those connecting certain cities with the most important European roads, is also changing the image among investors, who want to transport and export their products in the shortest possible times and at the lowest possible costs. If that was not the case, 55 new factories wouldn’t have opened right beside Corridor 10 in the previous period. With new factories, with the occupying of industrial zones, there is certainly an incentive for the development of commercial real estate, especially when the average time for issuing building permits is about six days and that applications are processed in a fully electronic procedure. With the introduction of e-permits, apart from the fact that there’s no more circling counters, thereby saving time and money, investors have gained another important advantage with this system in terms of predictability and transparency, as there are no “hidden costs” and they can monitor every stage of the procedure.

Do you have information on the impact of road network development on the logistics sector, in terms of the construction of large warehousing facilities and the like?

– Serbia is the shortest route between east and west and, with the completion of works on Corridor 10, this year alone our highways were crossed by about 17 million more vehicles than three years ago. A developed road network is certainly one of the main preconditions for the development of the logistics sector, thus for instance we already have a large Delhaize distribution centre built in the vicinity of Corridor 10, which Ikea is immediately beside. Operations will soon also commence at the Lidl distribution centre, which is likewise being built alongside Corridor 10. The recipe is clear: only high-quality infrastructure brings investors and their logistics, which is why Serbia is investing so much in this area.

How would you evaluate overall investment and growth opportunities in the real estate and transport infrastructure sectors?

– The two most important things that every investor seeking to open a factory looks for when deciding where to locate – whether it’s a country, a particular region or a municipality – is the infrastructure connectivity and the time needed to obtain various permits. Serbia has also made progress in constructing infrastructure and improving connections with neighbours, and in terms of procedures for issuing building permits, where we are ranked 10th in the world according to the World Bank. All this represents a clear signal for investors that Serbia is a good place for investment.

Here I would highlight the project we are currently working on to construct around two million square metres of apartments for members of the army, political and security services, which we want to expand to young married couples and scientists and which would come at a very affordable price and under special conditions. This project will further boost the construction and real estate sectors.

In 2017, according to official statistics, there was significant growth in construction-dependent industries, such as cement production, which grew by more than 10 per cent in the first quarter alone, compared to the first quarter of 2016

How much will the construction sector contribute to GDP growth this year and what are your estimates for the next two to three years?

– Considering all the projects currently being implemented, and the fact that the fourth quarter of 2017 has not yet ended, we can expect a further increase in the construction sector’s share of GDP in 2017. The construction sector’s share of GDP increased in the previous three years from 4.3 to 6.2%. This means that we are very close to achieving our goal – of the construction sector contributing seven per cent to GDP.

Also contributing to this will be changes in the regulations proposed by my Ministry, which will further reduce investors’ costs. Specifically, by amending the Law on Republic Administrative Taxes, we have proposed the abolition of seven administrative taxes, which will reduce investors’ costs by 5.7% of the value of the property. Among others, it includes the abolishing of the highest tax linked to construction, for the issuance of an operating license, which will no longer represent a parafiscal charge. We expect the setting of the level of charges on the basis of the real costs of the competent authorities will act to stimulate new investments, which were previously in lower volumes than could overwise be expected precisely due to the unjustifiably high levels of fees and charges.

Do you have an estimate of how much these works (road construction, major civil engineering works etc.) have contributed to the growth of activity in related sectors?

– It is well known that construction and infrastructure works have a positive impact on other branches of the economy, i.e. increased activity in this area has a multiplier effect. In 2017, according to official statistics, there was significant growth in construction-dependent industries, such as cement production, which grew by more than 10 per cent in the first quarter alone, compared to the first quarter of 2016.

When will we see tangible progress in the organisation of the cadastre and what will this mean specifically for real estate sector development?

– I expect the new law on cadastre registration to be adopted in the first quarter of 2018, and we will strive to prepare all the bylaws in parallel, in order for the law to be implementable immediately. This is important because the more efficient work of the cadastre saves time and money, and increases predictability in business, but also because of Serbia’s ranking on the next list of the Doing Business Index, as it will enable enough time for it to start being implemented and to be taken into account during next year’s ranking process.

The reform and adoption of the new law on cadastre registration will enable the entire job to be completed in one place instead of six. At this point, anyone who buys real estate must visit at least five counters, including the cadastre, the tax administration and the local tax administration. The objective of the reform is for most of this work to be conducted in one place, at the office of the notary. The Notary would complete the inspection of the Real Estate Cadastre, authenticate the purchase agreement, and then send it in an electronic procedure to the cadastre, which would forward it on to the Tax Administration and the local tax administration.

The end goal of cadastre reform, together with the new e-space reform, which will introduce electronic procedures for approving planning documents, is for citizens to receive an efficient service in this area, and for Serbia to additionally improve its rating on the World Bank’s Doing Business list.

In practical terms, the introduction of ecadastre and e-space means that the entire construction process, from the preparation of planning documents, via the issuance of permits, to the registering of whatever is being built, will be done in a simple, fast and electronic process.

The cadastre is not the only reform we are implementing that has an impact on the real estate sector. A lot has already changed, and the real estate market was already set in forward motion with the adoption and implementation of previous laws. Here I am primarily referring to the Law on Planning and Construction, as well as the laws covering the conversion and legalisation of properties.

These processes are all interconnected. Through the legalisation process, we help to legally protect houses and flats that were erected illegally, among other reasons due to a lack of planning documentation and permits that could entail waiting for up to several years. On the other hand, with the introduction of e-permits and the complete regulating of the work of the cadastre and planning documentation, we are creating conditions in which nobody will ever have a reason to build without a permit.

For successful reforms it is crucial to have joint work and public debates, and to talk with everyone in the country and the economy, because there is a certain amount of resistance to every reform, and broad consensus is the best way to ensure laws can be properly applied

How much has Serbia advanced in managing complex projects in your domain, including the professional and financial management of these projects?

– Changes in project management are one of the main reasons why more than 150 kilometres of new sections of highways have been built and more than 200 kilometres of railways modernised in the last three years.

It is today known precisely how priorities are determined and on what basis, and it can no longer happen that the state borrows without existing project documentation. Care is also taken to ensure the bulk of the expropriation is completed before works start, to ensure commenced works are not late halted due to unresolved property issues. In the Ministry we have also applied a management method in the sense that today a mentor is responsible for each particular project, whether it’s leading a project on a road or railway section, a bridge, a port or a factory.

The reason many projects are only being finalised today is partly due to the fact that we previously didn’t have an established system of management and accountability for what is being done. The consequence of that is that we had projects that ground to a halt, with the state paying millions in penalties.

There is no project in the last three years that hasn’t been finalised, and the implementation percentage of the Ministry I head, when it comes to capital projects, has been above 95 per cent for the last year or two. We expect a similar result this year too, given that significant payments are usually made at the end of December.

In which ways does the Ministry develop cooperation with real estate sector experts and investors?

– Through the system for the electronic issuance of permits (CEOP), the Ministry is in constant communication with investors and experts from the real estate sector. One of the forms of cooperation is the organising of training courses and seminars, where we address specific problems and provide professional assistance and support.

I believe that one of the main reasons the laws we’ve adopted have yielded good results is that we included all interested parties in their preparation, from various business associations and non-governmental organisations, to experts from universities and the private sector. The best example is the adoption of the Law on Planning and Construction, the drafting of which included the participation of USAID, NALED, the Chamber of Commerce, the Foreign Investors Council, GIZ, AmCham and many other organisations and institutions.

We even sent this law to institutions that we might not have needed to for their opinions, in order for us to incorporate all useful suggestions and gain a high-quality, implementable law.

I believe that without such an approach we wouldn’t have had the kind of result we have today. For successful reforms it is crucial to have joint work and public debates, and to talk with everyone in the country and the economy, because there is a certain amount of resistance to every reform, and broad consensus is the best way to ensure laws can be properly applied.